Over the past year, the cryptocurrency market has suffered one major setback after another from the Chinese government. The market has taken a hit like a fighter, but Combos has taken its toll among many cryptocurrency investors. The weak performance of the market in 2018 is pale compared to the thousand-percent profit in 2017.
Since 2013, the Chinese government has taken measures to control cryptocurrency, but nothing compared to what was implemented in 2017. (See this article for a detailed analysis of official notices issued by the Chinese government)
2017 was a banner year for the cryptocurrency market with all the attention and growth it has achieved. Extreme price volatility has forced the central bank to take further drastic measures, including banning initial currency offerings (ICOs) and a clampdown on domestic cryptocurrency exchanges. Soon, mining in China was forced to close due to excessive electricity consumption. Many exchanges and factories have moved abroad to avoid regulations but remain accessible to Chinese investors. Yet, they still failed to escape the claws of the Chinese dragon.
In the latest in a series of government-led efforts to monitor and ban cryptocurrency trading among Chinese investors, China has expanded its “Eagle Eye” to monitor foreign cryptocurrency exchanges. Suspicious companies and bank accounts for dealing with foreign crypto-exchanges and related activities are subject to measures ranging from limiting withdrawals to freezing accounts. There are even ongoing rumors within the Chinese community to take more drastic steps to implement it on foreign platforms that allow business among Chinese investors.
“Whether further regulatory action will be taken, we will have to wait for the order of the higher authorities.” Excerpts from an interview with the leader of a team from China’s Public Information Network Security Supervision Agency under the Ministry of Public Security on February 26
Why why !?
Imagine that your child is investing his savings in a digital product (in this case, cryptocurrency) that has no way of verifying its authenticity and value. He can be lucky and enrich it, or lose it all if the crypto-bubble bursts. Now scale it to millions of Chinese citizens and we are talking about billions of Chinese Yuan.
The market is full of scams and meaningless ICOs. (I’m sure you’ve heard of people sending coins to random addresses with the promise of doubling their investment, and ICOs that aren’t easy to understand). Many unskilled investors are in it for the money and will think less about the technology and innovation behind it. The value of many cryptocurrencies is derived from market estimates. During the crypto-boom in 2017, participate in any ICO with a reputable advisor onboard, a promising team or a decent promotion and at least 3X your investment will be guaranteed.
Lack of understanding of the firm and the technology behind it, combined with the proliferation of ICOs, is a recipe for disaster. Central bank members report that about 90% of ICOs are involved in fraudulent or illegal fundraising. In my opinion, the Chinese government wants to make sure that the cryptocurrency is ‘controllable’ and not too big to fail within the Chinese community. While China is aggressive and controversial, it is taking the right steps towards a safer, more regulated cryptocurrency world. In fact, it could be the best move the country has taken in decades.
Will China issue an ultimatum and make cryptocurrency illegal? I highly doubt it because it is quite meaningless to do. Currently, financial institutions are prohibited from holding any crypto assets when individuals are permitted but are prohibited from conducting any type of transaction.
A state-run cryptocurrency exchange?
In the annual “two sessions” (named because the two main parties – the National People’s Congress (NPC) and the National Committee of the Chinese People’s Political Consultative Conference (CPCC) both attend the forum in the first week of March, leaders discuss necessary issues and Gather to correct.
Wang Pengjie, a member of the NPCC, has launched educational projects on blockchain and cryptocurrency in China, along with the possibility of a state-run digital asset trading platform. However, a certified account will be required to allow trading on the proposed platform.
“The establishment of relevant regulations and in collaboration with the People’s Bank of China (PBoC) and the China Securities Regulatory Commission (CSRC), a regulated and efficient cryptocurrency exchange platform will serve as a formal means of raising funds for companies (through their ICOs and investors).” Excerpts from Wang Pengji’s presentation at the two sessions.
March towards a blockchain nation
Governments and central banks around the world have struggled to cope with the growing popularity of cryptocurrencies; But one thing is for sure, everyone has accepted the blockchain.
Despite the cryptocurrency crackdown, blockchain is gaining popularity and acceptance at various levels. The Chinese government is supporting blockchain initiatives and adopting technology. In fact, the People’s Bank of China (PBoC) is working on a digital currency and has made mock transactions with some commercial banks in the country. It is not yet certain that digital currency will be decentralized and will provide features of cryptocurrency such as anonymity and immutability. It would not be surprising if it only became a digital Chinese yuan because anonymity is the last thing China wants in their country. However, created as a close alternative to the Chinese yuan, the digital currency will be subject to existing monetary policy and legislation.
Zhou Xiaochuan, Governor of the People’s Bank of China. Source: CNBC
“Lots of cryptocurrencies have seen explosive growth that could have a significant negative impact on consumers and retail investors. We don’t like (cryptocurrency) products that exploit the huge scope of speculation that gives people the illusion of getting rich overnight,” excerpts Friday, March 9th. Xiaochuan interview.
In a media appearance on Friday, March 9, the governor of the People’s Bank of China, Zhou Xiaochuan, criticized the cryptocurrency schemes that help cash in the crypto-boom and fuel market speculation. He further added that the development of digital currency is ‘technically inevitable’.
At the regional level, many Chinese cities are running blockchain initiatives to grow their territories. Hangzhou, famous for its Alibaba headquarters, ranked blockchain technology as one of the city’s top priorities in 2018. It is also proposed to build an incubation center in Chengdu to encourage local governments to adopt blockchain technology. City Financial Services.
Local conglomerates such as Tencent and Alibaba have formed partnerships with blockchain firms or started projects themselves. Blockchain companies like VeChain have also secured multiple partnerships with Chinese companies to improve the transparency of the supply chain in China.
All the clues indicate that China is working towards a blockchain nation. China has always had an open mind towards emerging technologies such as mobile payments and artificial intelligence. Hence, it is doubtful that China will be the first blockchain-enabled country. Will we see the Chinese government retreat and allow its citizens to trade again? Perhaps, when the market has matured and is less volatile but definitely not in 2018.